Audit 291971

Policies and Procedures - COVID-19 Community Development Block Grant/Entitlement Grants (AL #14.218) Criteria: As the use of funds under the CDBG-CV have specific uses and requirements which are more narrow than those of normal operations under the City’s Community Development Block Grant/Entitlement Grants, specific written policies and procedures which address the small business grant assistance, the rental assistance, or the public improvement programs of the CDBG-CV grant should be created in order to ensure sound internal controls surrounding programs. Condition and Context: During testing of CDBG-CV funds, it was noted that the City had not prepared policies and procedures specific to the small business grant assistance, the rental assistance, or the public improvement programs of the CDBG-CV grant. This was noted in a monitoring letter from The U.S. Department of Housing and Urban Development. Although the City has since established certain written procedures to address the small business grant assistance and rental assistance programs, they have not established written procedures for the CDBG-CV public improvement program and have not addressed all components of the initial finding. Cause: The City was unaware that formalized written policies were required prior to the distribution of the funds. Effects: The City was not in compliance with the formal policy and procedure requirements. Recommendation: We recommend the City review current written policies and address the missing components of the CDBG-CV public improvement program; monitoring standards and timeframes, financial management; period of performance, record retention, program income, public service cap, special economic development underwriting requirements, duplication of benefits under the rental assistance program, emergency payments; a system to organize financial statements, document costs, and further ensure internal controls have been and are followed for the CDBG-CV programs. Auditee’s Response: The City’s Community Development Department is in the process of rewriting its Policies to include the CDBG-CV provisions. Those policies should be completed within the next couple of months.

Recordkeeping Concerning Duplication of Benefits - COVID-19 Community Development Block Grant/Entitlement Grants (AL #14.218) Criteria: Internal controls should be in place under the COVID-19 Community Development Block Grant/Entitlement Grants, to ensure there is not a Duplication of Benefits (DOB) for business assistance activities. All CDBG-CV grantees are required to establish and maintain adequate procedures to prevent any duplication of benefits for assisted activities (as discussed in Section III.B.9. of the CDBG-CV Notice). To demonstrate that no financial assistance has been received or is available to pay costs charged to a CDBG-CV grant, a grantee may demonstrate that no other funds are available for an activity by maintaining records of compliance with mandatory duplication of benefits requirements described in Section III.B.9. Condition and Context: During testing of subawards under activities allowed or unallowed, we noted that the City did not perform their own assessment as to whether business applicants had received financial assistance from other sources. Although they did require applicants to indicate whether other sources had been awarded and accepted or applied for from other sources, an independent review by the City was not conducted to verify these statements. Cause: The City was not aware that of the additional assessment process required to verify the statements made by applicants within their signed applications regarding whether other sources of financial assistance had been utilized or applied for in paying related expenditures. Effects: The City was not in compliance with the recordkeeping requirements. Recommendation: We recommend the City take the necessary steps to verify that no financial assistance has been received or is available to pay costs charged to a CDBG-CV grant for each recipient and maintain the documentation of these results within their files. Auditee’s Response: As noted previously, the City’s Community Development Department is in the process of rewriting its Policies to include the CDBG-CV provisions. Those updated policies will include safeguards to ensure no duplication of benefits will accrue and proper documentation of procedures taken.

Documentation of Prevent Prepare and Respond Tieback Responsibilities - COVID-19 Community Development Block Grant/Entitlement Grants (AL #14.218) Criteria: Documentation should be maintained for assistance provided under the COVID-19 Community Development Block Grant/Entitlement Grants, that details how the activities prepare, prevent, and respond (PPR tieback) to coronavirus. Condition and Context: Remote monitoring by the U.S. Department of Housing and Urban Development noted that proper documentation of the PPR tieback responsibilities was not maintained. In particular, it was noted that the City did not provide a detailed and descriptive assessment that evidenced how all businesses met the PPR tieback. Cause: The City felt the assistance provided to businesses properly met the PPR tieback as it enabled retention of jobs at small businesses. Effects: The City was not in compliance with the documentation requirements. Recommendation: We recommend that the City prepare written representations that provide a full description of their assessment and conclusions that properly support their determination of allowability for each business which received assistance. We further recommend the City implement policies that require detailed written assessments and conclusions prior to approval and disbursement of funds. Auditee’s Response: As noted previously, the City’s Community Development Department is in the process of rewriting its Policies to include the CDBG-CV provisions The City’s updated policies will include the above recommendations.

Policies and Procedures - COVID-19 Community Development Block Grant/Entitlement Grants (AL #14.218) Criteria: As the use of funds under the CDBG-CV have specific uses and requirements which are more narrow than those of normal operations under the City’s Community Development Block Grant/Entitlement Grants, specific written policies and procedures which address the small business grant assistance, the rental assistance, or the public improvement programs of the CDBG-CV grant should be created in order to ensure sound internal controls surrounding programs. Condition and Context: During testing of CDBG-CV funds, it was noted that the City had not prepared policies and procedures specific to the small business grant assistance, the rental assistance, or the public improvement programs of the CDBG-CV grant. This was noted in a monitoring letter from The U.S. Department of Housing and Urban Development. Although the City has since established certain written procedures to address the small business grant assistance and rental assistance programs, they have not established written procedures for the CDBG-CV public improvement program and have not addressed all components of the initial finding. Cause: The City was unaware that formalized written policies were required prior to the distribution of the funds. Effects: The City was not in compliance with the formal policy and procedure requirements. Recommendation: We recommend the City review current written policies and address the missing components of the CDBG-CV public improvement program; monitoring standards and timeframes, financial management; period of performance, record retention, program income, public service cap, special economic development underwriting requirements, duplication of benefits under the rental assistance program, emergency payments; a system to organize financial statements, document costs, and further ensure internal controls have been and are followed for the CDBG-CV programs. Auditee’s Response: The City’s Community Development Department is in the process of rewriting its Policies to include the CDBG-CV provisions. Those policies should be completed within the next couple of months.

Recordkeeping Concerning Duplication of Benefits - COVID-19 Community Development Block Grant/Entitlement Grants (AL #14.218) Criteria: Internal controls should be in place under the COVID-19 Community Development Block Grant/Entitlement Grants, to ensure there is not a Duplication of Benefits (DOB) for business assistance activities. All CDBG-CV grantees are required to establish and maintain adequate procedures to prevent any duplication of benefits for assisted activities (as discussed in Section III.B.9. of the CDBG-CV Notice). To demonstrate that no financial assistance has been received or is available to pay costs charged to a CDBG-CV grant, a grantee may demonstrate that no other funds are available for an activity by maintaining records of compliance with mandatory duplication of benefits requirements described in Section III.B.9. Condition and Context: During testing of subawards under activities allowed or unallowed, we noted that the City did not perform their own assessment as to whether business applicants had received financial assistance from other sources. Although they did require applicants to indicate whether other sources had been awarded and accepted or applied for from other sources, an independent review by the City was not conducted to verify these statements. Cause: The City was not aware that of the additional assessment process required to verify the statements made by applicants within their signed applications regarding whether other sources of financial assistance had been utilized or applied for in paying related expenditures. Effects: The City was not in compliance with the recordkeeping requirements. Recommendation: We recommend the City take the necessary steps to verify that no financial assistance has been received or is available to pay costs charged to a CDBG-CV grant for each recipient and maintain the documentation of these results within their files. Auditee’s Response: As noted previously, the City’s Community Development Department is in the process of rewriting its Policies to include the CDBG-CV provisions. Those updated policies will include safeguards to ensure no duplication of benefits will accrue and proper documentation of procedures taken.

Documentation of Prevent Prepare and Respond Tieback Responsibilities - COVID-19 Community Development Block Grant/Entitlement Grants (AL #14.218) Criteria: Documentation should be maintained for assistance provided under the COVID-19 Community Development Block Grant/Entitlement Grants, that details how the activities prepare, prevent, and respond (PPR tieback) to coronavirus. Condition and Context: Remote monitoring by the U.S. Department of Housing and Urban Development noted that proper documentation of the PPR tieback responsibilities was not maintained. In particular, it was noted that the City did not provide a detailed and descriptive assessment that evidenced how all businesses met the PPR tieback. Cause: The City felt the assistance provided to businesses properly met the PPR tieback as it enabled retention of jobs at small businesses. Effects: The City was not in compliance with the documentation requirements. Recommendation: We recommend that the City prepare written representations that provide a full description of their assessment and conclusions that properly support their determination of allowability for each business which received assistance. We further recommend the City implement policies that require detailed written assessments and conclusions prior to approval and disbursement of funds. Auditee’s Response: As noted previously, the City’s Community Development Department is in the process of rewriting its Policies to include the CDBG-CV provisions The City’s updated policies will include the above recommendations.